Magna Sees Flat TV Ad Sales for 2017

Media agency Magna expects national TV ad spending to be flat in 2017.

In its newest forecast, Magna says that high single-digit ratings erosion will barely offset high single-digit CPM inflation.

Magna says U.S. television is already one of the most expensive advertising mediums in the world, with CPMs in primetime for 18-49-year-olds averaging about $50 on broadcast and $20 on cable.

But many large-scale mass consumer brands remain loyal to the traditional TV campaign and bear the constant cost increases as they feel national TV still provides good, measurable efficiencies for both brand equity and retail sales, the forecast says.

Last year, some marketers moved money from digital to TV because of issues including traffic fraud and viewability. In recent weeks, brands have pulled their advertising from Google's YouTube because ads are running next to objectionable content.

Some CMOs feel digital formats still lack accountability, while not being that much cheaper than traditional TV, the report notes.

“Some CPG companies pulled money from digital formats back into linear TV in 2016 but we believe this was a temporary adjustment. In the mid/long term brands will at best maintain and optimize their linear TV investment but will not increase it significantly,” Magna said. “We now see CPG companies concentrating their television spending on fewer brands and products and launching some new products without the national TV campaigns that would have been an automatic part of the plan just years ago.”

In the next few years, spending increases are likely to go to online video formats, which are gradually providing better accountability, growing scale and improving targetability. At the same time, cord cutting will degrade the scale of cable networks, although opportunities for addressable ad campaigns should rise, the report says.

At the end of 2016, there were 42 million TV homes reachable through household addressable ad campaigns and $450 million was spent on those campaigns.

Across all media, Magna expects media advertising sales to grow by 3.7% in 2017, excluding the effects of the presidential election and the Olympics last year.

Digital ad sales will be up 14%, while offline media will drop by 3%.

Search and social growth will be fueled by marketing budgets redirected from “below the line” direct marketing channels. That means national advertisers don’t need to re-allocate massively from their traditional ad campaigns, including TV commercials, to fuel that effort.

Magna says that 2016 was, as expected, a record year for advertising in the U.S. with media revenues growing 6.6% to $180 billion. Without the $3.5 billion generated by the election and Olympics, ad growth still would have been 4.7%.

“While total marketing budgets are flat, the main driver of advertising growth at the moment is below-the-line direct marketing budgets [such as direct mail] being re-allocated towards Search and Social by big and small businesses,” said Vincent Létang, executive VP of global market intelligence for Magna and the author of the report. “Most of the net advertising dollar growth will be taken from traditional direct marketing budgets rather than new marketing spend. This leaves linear television budgets relatively unscathed and should provide for a solid ad growth this year again.”